During Phase I, we have developed a novel technology to capture the genetic diversity from unculturable fungi for drug discovery. Briefly, large segments of genomic DNA from unculturable fungi are cloned and introduced in genetically amenable laboratory strains. By doing this, we ask the laboratory strain to express genes from the unculturable fungi and to produce novel secondary metabolites with biological activities. By applying both molecular genetic and chemistry approaches, we demonstrated the feasibility of the technology. During Phase II, we will continue to investigate fungal heterologous gene expression at the molecular and genetic levels, but we will primarily emphasize the screening of transgenic strains for the production of bioactive compounds. We will apply several strategies to accomplish this goal. These include screening more libaries from diverse groups of unculturable fungi; expressing unculturable fungal DNA in multiple heterologous hosts; and growing the transgenic strains under various fermentation conditions. The chance of discovering leads from the transgenic strains will be further increased by screening multiple drug targets across therapeutic areas. One of the major scientific contributions resulting from this project is better understanding of fungal heterologous gene expression and gene organization and regulation of fungal secondary metabolism. PROPOSED COMMERCIAL APPLICATION New therapeutic drugs are urgently needed in all therapeutic areas. Millennium s drug discovery program covers all major human genetic and physiological diseases and infectious diseases. By applying transgenic strains to Millennium s proprietary high-through-put screens across multiple therapeutic areas, novel lead compounds will be discovered. The current market for therapeutic agents is enormous and is expected to expand in the future.